Diamond industry

Losing its Sparkle

  • Why it matters

    Why it matters

    Europe’s traditional jewelry market is being hit hard by falling gemstone supplies and low-cost rivals in Asia.

  • Facts

    Facts

    • Ph. Hahn Söhne is this year celebrating its 130th anniversary.
    • It is based in Germany’s gemstone capital, the small town of Idar-Oberstein which is rich in deposits of quartz, agate and jasper.
    • For years, no new diamond mines have opened anywhere, but demand for the precious stones remains high, especially in Russia and China.
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    Audio

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Tweezers holding diamond, close-up
Diamonds are still the Hahn family's best friend. Source: DigitalVision/Getty

At 76, Dieter Hahn could be considered the bedrock of the German diamond and gemstone industry, and a little old-fashioned. He’s the kind of person who still likes to send faxes, for example, because he can “scribble something on them.”

His son-in-law Christian Klein, 43, is from another time and world. He worked in the automotive industry before joining Ph. Hahn Söhne diamond cutters, and recently modernized warehouse administration at the family firm — “something that was long overdue,” he says.

All in all, the two understand each other, though it takes Annette Klein — daughter of Dieter and wife of Christian — to calm tempers from time to time. At 43, she is the family mediator and knows all three must get along in order to keep their company running.

This year, the firm, based in Idar-Oberstein in the far west of Germany, will celebrate its 130th birthday. It lays claim to being the oldest diamond-cutting operation in Germany and one of the last of its kind. The artisanal enterprise is now led by the fifth generation and, except for a few points of friction, is still doing well.

“We used to sort five carats in order to get a certain amount of excellent diamonds. Today it takes 20 carats to attain the same result.”

Dieter Hahn, Ph. Hahn Söhne

Ms. Klein knows her father will never retire and she still depends on his worldwide contacts. But she also knows that her husband is correct in many of his modernizing proposals. For example, not only storing each stone in a tiny paper bag but also registering it digitally – so that inventory no longer takes an entire week.

The Hahns have responded well to changes in the small, delicate industry, and the opinion of the family – particularly its senior member – is still listened to throughout the cutting industry.

The diamond and gemstone business has changed radically in recent decades. But the town of Idar-Oberstein — nestling in the hills about an hour’s drive from the Luxembourg border — still ranks among the metropolises for precious gems, along with Antwerp, London, Singapore and Mumbai.

Because of nearby natural deposits of quartz, agate and jasper, the small town developed into the most important industrial sector in the region. There has long been a technical college for jewelry design here. And since 1974, the diamond and gemstone exchange has had its headquarters in Idar-Oberstein.

Local restaurants have such names as “Cutter,” there is an “Agate Apothecary” and tourists come to visit both the precious gem market and museum.

Yet there are many problems: For years, no new mines have opened anywhere in the world, but the demand for diamonds remains high, especially in Russia and China.

This drives up prices – but also increases the expenditure of effort. “We used to sort five carats in order to get a certain amount of excellent diamonds,” said Mr. Hahn. “Today it takes 20 carats to attain the same result.”

But often customers aren’t willing to pay the price. And they don’t go to local jewelers as much as they shop on the internet, where they often can buy stones cheaper.

“(But) consumers seldom have a clue as to what the quality of the diamond actually is,” said Mr. Hahn.

Above all, they don’t know where it comes from. Mr. Hahn said that with his name and reputation, he stands for a strict examination of quality, because “anything else is frivolous.”

The industry is tight-lipped: No one is inclined to talk about prominent customers, sales figures, profits or losses. The Hahns are equally circumspect.

That’s because the prices for diamonds cut in Idar-Oberstein are imposing: The end product can be as small as a piece of candy but easily as expensive as a car. The company premises are monitored by video cameras, and there is a direct line to the police.

Still, scarcely anyone in Germany knows that work is done in Idar-Oberstein for the most prestigious and expensive jewelers in the world. Business is conducted behind closed doors. There is no Idar-Oberstein brand.

Once 5,000 people worked here, from cutters to engravers; today 2,000 remain in the little town. Much of the labor is now performed in India.

“The market has gone down a different path,” said Jörg Lindemann, managing director of the German Association of the Gemstone and Diamond Industry.

Many companies didn’t find successors and had to close. But those that are still active in Germany — like Ph. Hahn Söhne — are quite healthy, experts say.

For a long time, Mr. Hahn also had to worry about whether his firm would stay in the family. His son is a diamond cutter and works at the company, but didn’t want to join management.

As a teenager, his daughter Annette declined because she wanted to attend the commercial college in Mannheim. She worked for the trade-fair organizer Messe München, but later returned home for romantic reasons.

Today she and her husband own 49 percent of the firm. Her father retains 51 percent and continues to have the final say.

The senior Mr. Hahn once wanted to study law. As a young man, he said he had “no knowledge whatsoever about diamonds.” But he was quickly won over to the sensitive business by an aunt.

Today he is one of the most important representatives of the industry worldwide. He is a pioneer, advocate and winner of the “Diamantaire of the Year,” the highest award given by the World Federation of Diamond Bourses, or WFDB.

Along the way he also has had to deal with downturns in the business and adapt to changes in the market. Most important, he said, is customer care and the high quality of his work.

The Hahns are proud of what they have made out of their company: a well-regarded diamond-cutting operation led by a senior figure of global renown.

And they accept that the elder Mr. Hahn sometimes marches to a different beat to the two junior partners.

 

Diana Fröhlich writes for Handelsblatt’s Reports and Names section. To contact the author: d.froehlich@vhb.de

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